Episode 20 - Why You Should Be Focused on Building a Portfolio
In this episode, Quentin talks with a member who is looking to leverage their primary residence in order to enter the real estate investing market. When looking for financing, we explore why you should approach it as building a portfolio and not just one property.
Talking about their background in real estate, the member shares that they own their house free and clear, and over the last year or two, he has been looking to leverage that. From a financial standpoint, they have been approved for a HELOC, and the funds have been there, up to $360,000 on this current house, as well as a mortgage of up to $700,000. Now, he’s looking to get into the investment property realm, and from the research that he has been doing, he has settled on the Peterborough area. His plan is to do the long-term strategy, and at least get one property and then see if it's for him, if he enjoys it, and if it makes sense.
Quentin starts off by saying that there's lots of ways to do, but you got to decide for yourself, and based on the HELOC that they already have, they may be able to get up to five properties based on their income and what they are doing, rather than just one. He adds “the thing you want to think about is how can I plan out more, if I wanted to have more and not get stuck.” Additionally, how you want to do financing is, you want to look at how can I get to wherever my goal is, you don't want to be put in a product that gets you stuck, so that you can't move forward for two years or three years. He suggests that you should also be talking to a couple other people, just to see what they have to say, and what that looks like to you. Your First Three Properties in Real Estate a good course to learn fundamentals, to help him decide in this area.
On the subject of strategies, Quentin says that the key that you want to ensure is that you're cashflow positive on your own. Don't worry about what the market is going to do. Think about buying a property that cash flows, that you can hold for a long period of time, that's going to be easy for you to manage as an asset or hire a property manager in the area to manage it for you. What you want to do is make sure that the cash flow covers the cost of a property manager maintenance repairs, that you can see all that's considered, and that's what you look at your property analyzer for. if you have a longer-term point of view, you can often ignore a lot of the gyrations of the market.
As for their house, they have a lot of equity, and Quentin says that it’s great that they have access to utilize the equity, he continues “the best possible way, don't think about the next property, think about how I can build a portfolio.” what you would look at is positioning yourself so that you could add some value. Once you do that, you refinance that rental property, use the money that you get from the refinance to pay back your initial investment, make sure that you can float the line of credit using the cash flow from the rental property included in your number. One of the things that people don't often tell us you can get a new mortgage on your rental property with a HELOC, and what the member is trying to do is something called the Smith Maneuver.
Quentin adds that the next piece for them would be, it depends on what they want to do, whether they manage it themselves or not, watch the five-hour course on property management, key policies and procedures. Furthermore, they also have a whole course around COVID and rental properties. In conclusion, Quentin mentions the Q&A calls, where members can ask their questions. As for his concerns about finding tenants, Quentin shares that due to rent control in Ontario, the byproduct of that is a lack of supply everywhere, there is a lack of supply across. This means that finding tenants should not be a problem.
· WhichLender are they Getting 700K From?
· How You Should Get Your Financing
· What Strategy is He Thinking About Using for His Properties? [00:07:58]
· When Did He Get His House and How Much Has it Improved in Value?[00:09:41]
· What to Do After Using HELOC as the Down Payment? [00:13:10]